FedEx outlook punished by 'volume declines in Europe': Analyst

Cowen Senior Research Analyst Helane Becker joins Yahoo Finance Live to react to FedEx earnings and discuss the global economic outlook.

Video Transcript

SEANA SMITH: Well, again, FedEx releasing its earnings here midday. The stock initially popping just over 4%, settling up nearly 1%. Wall Street a bit excited about the cost saving measures that the company did announce, planning to save up to $2.7 billion this fiscal year, up to $4 billion in cost savings in fiscal year 2025. For a closer look, let's bring in Helane Becker, Cowen senior research analyst. Helane, it's great to see you. It looks like the Street was encouraged by what they heard from FedEx. What's your take?

HELANE BECKER: Yeah, I think any time they can quantify and be specific about how they're going to get their cost savings, I think is very helpful. These results weren't entirely surprising since they pre-released last Thursday night. And I guess a few of us had done previews and were significantly-- we were low on the Street, and they're still below our number. But most of the estimates were significantly higher than us, so there was that disappointment to contend with last Friday.

RACHELLE AKUFFO: And Helane, we do seem to be in the sort of show and prove status when it comes to FedEx and their management team. In terms of the work that's still needed ahead to really get that confidence back when you look at how a UPS and a perhaps an Amazon also taking market share stacks up against them, how hopeful are you that FedEx can actually pull this off?

HELANE BECKER: Yeah, you know, it's interesting. They have a new management team. It's been in place maybe a year, a year and a half. So they do have quite a lot to prove. And they had a really tough integration with the TNT acquisition that took them probably twice as long and cost at least twice as much, if not more, maybe closer to three times as much as they forecast it would.

And I think that UPS and Amazon-- well, I don't know about Amazon, because we don't cover it, but UPS hasn't said they're seeing the same thing. And I think part of the issue for FedEx is that a lot of the volume declines are in Europe. And Europe is faring worse than the US. I was in Europe last week for work in North Africa. And I can tell you that the European cities I visited, investors there are very concerned about how the winter is going to shape up.

And at the conference I attended, there are a lot of investors and panel participants who are concerned about what will happen, especially in Europe, with the war with high energy prices, with high food costs, really a lot of inflationary pressure. And I think FedEx has more exposure to that because I don't cover DHL, but they also noted some headwinds based on the comments I just made.

DAVE BRIGGS: And the question was, Helane, that very day, Raj Subramaniam laid it out very clear, this is more of a global economy problem than it is a FedEx problem. Now that you've seen the results, do you have a better sense of whether this is actually a FedEx problem?

HELANE BECKER: Yeah, I think so. UPS had a sell side investor meeting the day after Labor Day. And they certainly did not say they were seeing any signs of slowdown. But I don't think they're as big in Europe as FedEx and DHL are. I know they were bigger, but with the TNT acquisition, FedEx kind of caught up. So I think their issues are a little bit different. But to your point, I think it's definitely global and more company specific.

DAVE BRIGGS: Helane Becker, really appreciate you being here. Thank you so much.